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Grain prices good for peanut growers

What a difference a year makes, especially in farming. “This time last year, all crop prices were so bad — except for peanuts — that we were talking to farmers about the economic premiums they would need to see before they considered any type of crop rotation,” says Marshall Lamb, director of the National Peanut Research Laboratory in Dawson, Ga.

“Now, however, we're seeing bullish markets for the grain crops, and many farmers will be loosening their rotations somewhat this year,” said Lamb, speaking at a recent regional peanut production meeting held in east Alabama.

It's definitely a new ballgame in farming this year, he says. “And it's kind of exciting, because we finally have other crops competing for our land from an economic standpoint. As farmers, this is exactly the position in which we want to be,” says Lamb, who also farms with his brother in southwest Georgia.

In Georgia, he says, three major crops take up a majority of the irrigated land. These include cotton at about 500,000 irrigated acres, peanuts at from 275,000 to 300,000 irrigated acres, and corn, which has dropped significantly in acreage in recent years.

“Corn once took up a lot more irrigated acres, but it's now taking less, and it's all because of prices,” he says.

Turning to U.S. peanut production, Lamb says acreage was relatively flat from 1996 to 2001, under the old government quota program. “Then we passed a new farm bill, and we saw a slight reduction in acreage from 2001 to 2002. Then we started increasing acres in 2003, 2004 and 2005. This is part of the problem we now face in the market, especially the production from 2004 and 2005,” he says.

Farmers should bear in mind, he adds, that grower groups are trying to work out the current situation with the repayment rate. “Some farmers have asked why growers are trying to lower the repayment rate. It's because it allows producers to get a marketing gain, and in situations of over-supply, it's very important.

“Right now, we have an excess supply of about one half million farmer stock tons. And it's because we could not move the excess in 2004 and 2005, and that's hanging over our heads. If the repayment rate was set right, and we would have been able to clear these peanuts in the European Market, think about the position farmers would be in now in the face of these rising grain markets,” says Lamb.

In 2005, a drastic market correction occurred, he says. “We had an over-supply and planted about 1.7 million acres of peanuts in the United States. Then, in 2006, we planted about 1.18 million acres. The last time the U.S. had a peanut acreage this small was in 1915. Granted, we now have more production from our acreage, but we did see a tremendous decline,” he says.

It's still uncertain, says Lamb, how many acres of peanuts will be planted in 2007. Unless things change between now and planting time, there will be a further decrease, he adds.

An excess supply of peanuts continues to hang over the heads of growers, he says, but they will be gone by this time next year. “If not for that excess supply, we'd have much better balance in the system.”

Looking at the different crop options for 2007, Lamb says the last time corn prices improved significantly was in 1996, when they reached the $3.55-per bushel range, with some selling in the $4-range.

“Georgia has a history of growing in excess of one half million acres of corn. But as the price dragged, acres leveled off to the 200,000 to 300,000-acre range. Last year, we planted about 225,000 acres for about $2.35 per bushel. The price now is at $3.75.”

Also in 1996, when soybean prices moved to more than $6.50 per bushel, Georgia growers planted about 400,000 acres of beans, says Lamb. “We have proven we can plant soybeans. Acreage went back up in 2003 because of problems in the Midwest, but it came back down again with the price.

“Beans are now at about $7.13 per bushel, but they won't take any irrigated acres in our area — pathologists have told us not to do it. But they definitely will take away dryland acres. If we can grow them for just over $100 per acre and sell them at $7, some growers will see the opportunity to make money, especially if they double-crop beans with $4 wheat.”

Cotton acreage has remained relatively flat in Georgia in recent years, says Lamb, ranging from about 1.3 million to 1.45 million acres. This past year, growers planted 1.37 million acres of cotton in Georgia.

“Cotton is so dependent on factors such as monetary policy and international plantings — things over which we don't have much control. Cotton acreage in Georgia might go down this year, but it won't be a significant amount.

“Last year, we didn't have a good peanut year — either dryland or irrigated, but we had one of our better irrigated cotton crops. Some of the cotton genetics are really helping us out.”

Some of Georgia's corn acreage in 2007 will come from peanuts and some will come from cotton, says Lamb, but there's a limit on how much corn can be grown in the state.

“We don't have the infrastructure to handle the corn we planted back in the 1990s because we shifted a lot of that back towards cotton. We have worn-out grain bins, and we have a lot of farmers with cotton pickers but no grain combines. We have a lot of infrastructure development to do. Another limiting factor this year will be the availability of seed. All farmers want to grow corn, but I don't know how much we'll be able to grow this year because of these two issues.”

The limits placed on corn acreage expansion are probably a good thing, says Lamb, because growers need to strike a balance with what they already have.

Bioenergy continues to drive the corn market, and it continues to have an impact on grain prices, he says. There currently are 111 operating ethanol plants in the United States with another 75 under construction. In Georgia, ground recently was broken for a plant in Camilla, one is coming on line in Tifton, and investors are being solicited for a third one in Sandersville.

In 1980, the United States produced 175 million gallons of ethanol. That grew to 900 million gallons in 1999, 1.6 billion gallons in 2000 and 4 billion gallons this past year. “And that didn't include the 75 plants that currently are under construction,” says Lamb. “How will we feed those plants?”

Peanut growers are not seeing any contracts for the 2007 crop because of the carryover in 2004 and 2005, says Lamb. “If acreage remains the same and demand stays the same, or if acreage decreases or shifts to non-irrigated, the supply of peanuts by this time next year is going to be very tight — tighter than we want it to be. Instead of having excess carry-in, we will have a deficit carry-in.

“If you look at supply and demand numbers, we do need a slight increase in U.S. peanut production this year compared to last year. We don't need to go back to 2005 levels, but we do need a slight increase. But I don't know if we'll see it because farmers must decide which crops they need to plant to maximize their profits.”